MNCs double down on their China play, while FDI rises as glad tidings dispel uncertainties
China's new "dual circulation "development pattern, its sharpened focus on reform and opening-up, effective epidemic control measures for resumption of industrial activity, and the sense of anticipation about the announcement of details of the 14th Five-Year Plan (2021-25) are all encouraging foreign companies and foreign investors to double down on their commitment to the Chinese economy, industry experts said.
Many multinational corporations such as General Electric, Fujifilm, Schneider Electric, Schindler Group, and Air Liquide Group are swearing by their expansion plans in China, in spite of the pandemic's impact on their financial performance this year.
Meanwhile, foreign direct investment continues to show a robust trend in China, reflecting the economy's enduring allure against a background of trade tensions, unilateralism, protectionism, deglobalization and gloom-and-doom economic forecasts.
FDI in China grew by 5.2 percent on a yearly basis to 718.81 billion yuan ($107.2 billion) in the first three quarters of the year, according to data released by the Ministry of Commerce.
In the services sector, where China is going big, FDI reached 559.68 billion yuan, up 15 percent year-on-year, during the January-September period.
FDI in the high-tech services sector, another priority area of China, surged 26.4 percent from same period last year.
The Ministry of Commerce will continue to implement the negative list for foreign investment and expand the scope of businesses for foreign investment, thereby sharing the market and opportunities in China with foreign investors, said Wang Shouwen, vice-minister of commerce.
China has pledged to stabilize foreign trade and investment through significant increases in items on the industry catalog. Such measures, when effected, are expected to help foreign-funded firms benefit from preferential policies.
With China laying emphasis on its domestic circulation, industry is reorienting itself with the goals of national development. For, the three economic sectors－agriculture, manufacturing and services－are expected to contribute toward attaining the goals.
Executives of multinational corporations said the world's second-largest economy has not only negotiated the impact of COVID-19 well but also sustained growth, with third-quarter GDP rising 4.9 percent year-on-year. In doing so, China has bucked the downtrend worldwide, contributed massively to global economic recovery, and raised hopes of playing an instrumental role in shaping the future.
So, foreign companies are quickly realizing they need to succeed in a big market like China, which continues to restructure its economy, in order to survive and thrive elsewhere.
At the beginning of this century, MNCs' expectations when investing in China's manufacturing sector were simple: quick government approvals, land usage rights from the authorities concerned, power and water supplies from utilities, easy money transfers, and smooth or unhindered passage for executives, experts and recruiters. They received all of such benefits, and thus could operate their factories and sell their products across the country.
Today, it's a different story. MNCs are no longer content shipping their products from China to other countries. They are keen to adopt new business models to thrive in New China.
Gu Xueming, president of the Chinese Academy of International Trade and Economic Cooperation, which is based in Beijing, said China's fast-growing digital economy has sharpened the country's competitive edge in industry and created favorable conditions for foreign companies to invest in more areas.
He said that 4G-and 5G-based digital infrastructure is a solid foundation that facilitates rapid growth of artificial intelligence, big data and diversified online services.
Experts and global business leaders said they expect the 14th Five-Year Plan to define key economic and social development goals, with emphasis on high-quality development and national competitiveness. Details of the plan are expected before the year-end.
Companies from Europe, Japan and the United States operating in China have already raised their investment in innovation, design, supply chain development, science and technology.
New growth points will present themselves as the economy becomes more sophisticated, Gu said.
Despite the COVID-19 impact on first-quarter sales of its imaging products and services in China, the local unit of Fujifilm of Japan has since recovered steadily. Improved epidemic-prevention and control measures in China have helped the business a great deal, said Hironobu Taketomi, president of Fujifilm (China) Investment Co Ltd.
He said the company will identify areas consistent with the national development direction, make targeted investments and promote the growth of related business areas like 5G.
Fujifilm will focus on integrating its medical diagnostic equipment and image processing technology with new technologies like AI and the internet of things so as to better foster the growth of intelligent medical services in China.
The company will also jointly build the national health plan "Healthy China 2030", which aims to improve people's health as a crucial part of the country's development strategy, he said.
Fujifilm will participate in the third China International Import Expo in Shanghai in November. It will be the third consecutive year for Fujifilm to attend the event.
Pang Xingjian, senior vice-president of Schneider Electric, the Rueil-Malmaison, France-headquartered multinational specializing in energy and automation digital solutions, said thanks to the company's 90 percent localization rate of supply chain in China, it had no trouble in resuming production during the first quarter, when outbreak of COVID-19 affected many businesses in China and elsewhere.
"China's supply chain structure has ensured that we managed business coordination in an efficient manner with quick response to the pandemic," he said.
Schneider has raised productivity at its 23 plants throughout China to offset the production delay or temporary closure of its factories in other countries. This strategy helped it to achieve smooth global linkages and mitigate the impact of the contagion.
According to Pang, China has become a source of innovation for the company rather than just a market. Schneider's annual investment in research and development in China surged over 15 percent in the past four years, and will continue to grow this year and in the future.
In its next step, Schneider will continue to expand the market presence of EcoStruxure, its open, interoperable, IoT-enabled system architecture in the Chinese market, especially in its manufacturing and energy sectors, to better combine operational and information technologies into one management interface.
Given Chinese consumers' strong spending power, expanding middle-income group, comprehensive support for industry, advanced services and logistics networks, the country's potential for attracting FDI will continue to expand in the long run, said Zhang Shaogang, vice-chairman of the China Council for the Promotion of International Trade.
"It is also worth mentioning that the rate of utilization of foreign capital in China's high-tech industry continues to soar, and foreign-funded enterprises have invested more in this sector," Zhang said.
Daryoush Ziai, CEO of Schindler Group, the Swiss elevator and escalator manufacturer, said the overall new installation market will stay strong in China over the next several years, because many policies and initiatives introduced by the government will actively promote the rapid development of city clusters including the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area and the Beijing-Tianjin-Hebei region as well as the Hainan Free Trade Port.
"Therefore, it will drive investments in infrastructure, commercial and office buildings, and residential projects, and bring along tremendous demand for elevator products," he said.
Schindler's products manufactured in China have also been exported to other countries and regions including South America, the rest of Asia and East Europe. Schindler has been an active participant in the Belt and Road Initiative, with many of its projects located in Malaysia, Uzbekistan, Russia and African countries.
China is on its way to upgrade elevators as well as installing new units in aging urban residential buildings of its cities, Ziai said. So, old equipment will be modernized while new elevators will be installed in old community buildings. The government policy in this field will certainly improve people's livelihood and create more momentum for elevator manufacturers.
As China has become General Electric's largest single-country market outside the United States, GE's local unit, which has more than 20 manufacturing bases across the country, sees huge opportunities in energy, aviation and healthcare, said Xiang Weiming, president and CEO.
Trends like clean energy, affordable healthcare, regional integration, urbanization and modern manufacturing spell opportunities for GE, he said.
GE started to build a ventilator factory in Wuxi in East China's Jiangsu province in June and a plant in Puyang in Central China's Henan province in August, to produce onshore wind power equipment.
Air Liquide Group, a French industrial gas producer, is building an air separation unit in Tianjin with an investment of 60 million euros ($70.98 million). The ASU is expected to support the growth of the chemical and steel industries in the city.
With an oxygen production capacity of more than 2,000 metric tons per day, the facility is scheduled to become operational in 2022.
The company operates seven ASUs in Tianjin, as well as a network of multi-sourced pipelines that deliver oxygen, nitrogen and hydrogen to customers in the adjacent premises.
Fran?ois Abrial, a member of the Air Liquide's executive committee supervising operations in the Asia-Pacific region, said as one of the most important industrial cities and the largest port in North China, Tianjin is a key base for Air Liquide in China.
It shows the company's confidence in the sustained growth of the Chinese industry toward cleaner and more efficient operations.